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Anglo creditors to get first repayment within months

Junior bondholders likely to be forced to wait until 2018

Thu, Apr 21, 2016, 15:41

Joe Brennan

The liquidators of Irish Bank Resolution Corp now have about €2.1bn of cash available for distribution to creditors. Photograph: Bryan O’Brien/The Irish Times

Creditors to the failed lender Anglo Irish Bank are set to receive their first payment within months after its liquidators built up about €2.1 billion of cash following the sale of most of its assets, according to sources.

While the prospect of junior bondholders in the bank, who refused to share in its losses, being repaid the €285 million they’re owed has increased in the past year, they are unlikely to receive anything until at least 2018, the sources said. More senior creditors, led by the government itself, will be dealt with first.

The liquidators of Irish Bank Resolution Corp, as Anglo Irish was renamed in 2011, now have about €2.1 billion of cash available for distribution to creditors, the Minister for Finance Michael Noonan said in reply to a parliamentary question from Sinn Fein TD Pearse Doherty this month. That is up from €1.85 billion a year ago.

Most junior bondholders accepted losses of up to 80 per cent of their investment between 2009 and 2010, sharing of the rescue bill for the now-defunct bank, which cost taxpayers almost €30 billion. However, a group of subordinated bondholders held out and have since submitted claims in the region of €285 million to the liquidators, Kieran Wallace and Eamonn Richardson of KPMG in Dublin.

Legal battle

These include Wolfgang Klopfer, head of Munich-based XAIA Investment, who won a legal battle in 2014 to stop the bank inflicting losses on his €17 million of subordinated bonds. Mr Klopfer declined to comment on the process this week.

The prospect of these bondholders being made whole has emerged as a major political and legal dilemma over the past 15 months, as it became clear that the bank’s liquidation would deliver a surplus for creditors.

Former Central Bank governor Patrick Honohan told the Government last year before his retirement that the moral case for these investors getting nothing is “almost unassailable”. However, Department of Finance second secretary general Ann Nolan that such a move would be legally difficult.

Still, it is likely to be at least three years before the junior bondholders receive anything, as they stand at the back of the queue of creditors. At the time the bank was put into liquidation in February 2013, the bank owed about €5 billion to unsecured creditors, including almost €3 billion to units of the bank owed each other.

Senior bondholders

The government was owed €1.1 billion at the time, having paid out senior secured bondholders who were covered by a state guarantee.

Final payments to creditors are unlikely before the hearing of a legal battle between the family of Seán Quinn and IBRC, which is not due to be heard in court until 2018. The Quinns claim Anglo Irish lent them billions of euros illegally in 2008 to shore up their stake in the bank. A victory for the family would see them join the list of unsecured creditors.

IBRC’s liquidators are currently working on a third progress report on the liquidation, according to Mr Noonan.

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